The Regressive Impact of a Homestead Elimination

In last week’s Brief we noted that if the County eliminates its $15,000 homestead exclusion-a decision the County may or may not be deliberating on as it finalizes the 2012 budget-the impact would be quite regressive and would fall upon owners of less expensive homes.

Looking at Census data from the American Community Survey we obtained value ranges for owner-occupied homes in Allegheny County. There are roughly 351,000 owner occupied homes in the County; just over 80% of them have a value of $199,999 or less. Using that data as a proxy and assuming that all of these homes have taken the exclusion, it means close to $17 million of the $21 million the County budgets for the homestead exclusion goes to homes carrying a value of less than $200,000. Based on the Survey data about 4% of owner occupied homes have a value of $500,000 or more (the County tax bill on a $500k home is $2,300); allocating a 4% share of the total pool of homestead exclusion money amounts to $840,000.

Again, any qualified homeowner is allowed to take the exclusion to lower the assessed value of their property for County tax purposes. The impact of a $15,000 deduction is much greater on lower valued homes than more expensive homes.

With all the noise about tax cuts for the rich and unfairness about deductions nationally, the local discussion about the homestead exclusion offers a stark contrast in tax policy.